Contractors' special... Have you ever seen the phrase "Contractor's Special" when perusing the Real Estate section of your local paper? Ever wonder why someone would want to buy a new home (new to them, anyway), only to move in and start paying for home improvements like painting, a new roof, landscaping, woodwork or plumbing right away?
Appreciation By purchasing a home that needs improvement, you're giving yourself a higher ceiling (pardon the pun) for the future resale of your home. If you buy a house, it will only appreciate about three to five percent per year - hopefully. Obviously a great number of factors affect that appreciation. But only by investing in home improvement can you greatly enhance the resale value of the home you just purchased.
Do-it-yourself You might even be able to do some of the easier things yourself, like hanging new wallpaper or painting, replacing the carpet, or removing outdated styles that give your home that dated look. But you're best off leaving the big stuff to a professional contractor. And when considering the purchase of a fixer-upper, remember that large exterior additions or major repairs can be expensive, and that the correction of major structural flaws in your home may not even enhance its market value in the first place. Stick to the minor jobs that can pay you back double their costs.
Professional inspections Naturally, you'll want to have any home, but particularly a fixer-upper, inspected by a professional before you buy. You should also be careful about fixing up your home too nicely. In other words, don't make yours the nicest home on the street, because you'll start to experience diminishing returns if the intrinsic value of your neighborhood is lower than that of your home.